Because we are writing this article this week before official numbers are released, we decided to go inside the numbers and focus on listing inventory and sales data.  According to preliminary numbers researched by the Ellis Team, listing inventory rose again for the 3rd consecutive month.

Single Family Home Listing Inventory in SW Florida
SW Florida December 2011 Listing Inventory

Lehigh Acres has been holding fairly steady while Cape Coral is seeing the largest gains in inventory.  Fort Myers is inching higher ever so slightly.

What’s interesting is the distressed sales market.  We track a variety of graphs.  One graph not shown here because it’s a little tangled and hard to read in newspaper format shows large drops in distressed sales in Lehigh Acres, Fort Myers, and Lee County overall.  Cape Coral has held steady at 50.45% of all single family sales being distressed.  Lee County stands at 48% distressed rate in November.

SW Florida Distressed Sales Chart December 2011
Foreclosures Vs Short Sales December 2011

We have included a Foreclosures Vs Short Sales graph that is a bit easier to read.  It fairly well shows the history of the foreclosure and short sale market in SW Florida.  As you can see, the height of foreclosure sales was in June 2009, while the height of the short sale market was March 2011.

 

Banks revved up their short sale departments to handle an increased load.  It can be said that potentially each of these successful short sales may have saved a corresponding amount of foreclosures, so it was in the banks and the markets best interests to sell these homes as short sales rather than as foreclosures.

Going into 2012 we’re going to continue to watch the listing inventory and the mix of inventory.  Traditional sales are on the rise as a percentage of all sales, although many homeowners are not selling at today’s bargain basement prices.

Speaking of bargain prices, many buyers are calling wanting to buy homes for investment and expecting 2009 prices.  It seems like sellers are always the last to recognize when prices are dropping and buyers are the last to recognize when prices are rising.  Why is that?  Could it be selective hearing or denial?

We can definitively say that investment homes in Cape Coral and Lehigh acres bottomed in 2009 and have risen since.  Buyers today can no longer pick up a home for $35,000 in Lehigh unless it has major problems.  $70,000 is more common place for the low end now, so essentially prices in the low end have doubled.

Sales are flat in December versus November; however we are expecting sales to pickup in season again.  We’ve had no trouble selling homes.  The biggest challenges we’ve faced are closing these homes.  Lately we’ve been encountering title issues, mortgage re-disclosure issues due to any delays, and buyers not waiting patiently for the short sale approval.  We’re getting short sales approved within 60 days in many cases, but buyers are impatient.  Going forward the industry will have to do a better job educating buyers as to what the realistic expectations are for approval and closing time frames on short sales.

We’ll also watch foreclosure inventory as we are expecting a few more in the 1st and 2nd quarters of 2012.

We’ll keep our eye on the SW Florida real estate market for you, and whether you’re a buyer or seller, we hope Santa is better to you this year than he was last year.  The market is looking up, and we hope your holiday spirits are too.

 

Banks are contacting customers who are past due or in financial trouble and offering owners or tenants up to $20,000 in relocation assistance to move out of home and hire an experienced agent to sell the home as a short sale.  Banks are also offering owners money to agree to a deed in lieu foreclosure in some instances as well.

Benefits of Short Sale Versus Foreclosure Chart
Alternatives to Foreclosure Chart

There are several advantages for taking the bank up on their offer.  If you let the property go to foreclosure, you’ll be evicted without relocation assistance.  Additionally your credit will suffer more in a foreclosure than a short sale or deed in lieu.  The owner is more in control when actively pursuing a sale through an experienced agent than giving up all control to the bank and the legal system.

A short sale is a commonly used alternative to foreclosure. Generally, when putting your home on the market, the goal is to market and sell your house for an amount greater than any and all outstanding liens against the property. Liens include all mortgages, escrows and fees on the property.

If you can no longer afford to make your mortgage payments and your house is worth less than you owe, a short sale allows you to sell your house at the current fair market value. You then have an option to move to a more affordable situation. In a short sale, the investor or owner of your loan must approve the sale because they are entitled to repayment of the loan and will be receiving less than the amount owed.

If you have additional liens on your property with other lenders, such as a home equity loan, all investors must come to an agreement in order to complete the short sale. This process takes time, and an experienced agent is required to navigate and negotiate through these challenges.

Another alternative is a deed in lieu of foreclosure. With a deed in lieu, you voluntarily transfer ownership of the property to your investor to satisfy the amount due on your first mortgage. In some cases, you may be eligible for a deed in lieu without first attempting a short sale of your home. A deed in lieu generally takes about 90 days, depending on your situation.

In either a short sale or deed in lieu you may be responsible for paying a deficiency.  There are many factors that determine this, such as if the home was your primary residence, what state you live in, your financial situation, etc.  Sometimes this can be negotiated with your lender.

In any event, most lenders agree it is much better on your credit report and they are likely to lend you money in the future faster if you agree to a short sale or deed in lieu instead of a full blown foreclosure.

If you’ve been contacted by your lender, it may be at least worth considering your options.  Don’t throw away documents sent to you by your lender.  If they make you an offer call your attorney for legal advice or an experienced real estate agent for advice on the program and assistance selling your home.

The banks really don’t want your home back.  They’d prefer that owners pay their mortgage payments.  When that’s not possible, it may be less expensive to offer the occupant relocation assistance and get on with the process of selling the home before it gets to the costly foreclosure process.  Once the home gets into foreclosure, the costs mount, the credit suffers, and owners lose options.

If we can help, call us at 239-489-4042.  Each situation is unique and it takes time to look into each program.  The good news is we have past experience with many of these programs.

 

We’re writing this article this week two days before official numbers are released, so by the time you read this official numbers will have been released. Absent this knowledge, we expect prices in August to be higher than last year and sales to be down from last year, however sales volume may be higher than July.

SW Florida Real Estate Bargains
Year End Median Sale Prices For Single Family Homes SW Florida

We’ve included a chart of average year end sales prices which is really an average of prices for that given year, not the Dec 31 average price. As you can see, prices fell from their peak in 2005 through 2009 where they stabilized and actually rose in 2010. In 2011 we’ve seen more gains over 2010.

We started writing articles and advertising back in 2009 that Florida was on sale and buyers flocked here in droves looking for bargains from all over the world. Buyers have been competing with each other for the best bargains and in fact many of these properties have seen multiple offers. As you can see from the year end chart, prices are still very affordable and are on par with 1996-1997 prices. If you look at the attached chart you’ll notice prices in July were up 14.33% over last year and up 19.1% over 2009 prices.

Median Sale Prices Single Family Homes in SW Florida
SW Florida Real Estate Prices 2009-2011

We are fielding calls from buyers looking for foreclosures, short sales, and otherwise good bargains. They just finished reading on a website or watching an older YouTube video how another buyer bought a $20,000 condo or $30,000 house close to the beach and they want to come here and buy the same thing.

If you ask any agent in this market I’m sure they’d chuckle because they’re answering some of the very same calls. This is where the perception that Florida is on sale, which it is, collides with reality. The days of buying newer homes for $35,000 are over unless the home has serious defective drywall issues or is gutted. We still have some inexpensive condos for sale. For instance we just listed a bank foreclosure 1 bedroom, 1 bath condo in Mystic Gardens for $27,900 which is a bargain. These deals are becoming fewer and farther between.

Unfortunately buyers from all over are calling and expecting homes close to the beach or on the beach for ridiculously low prices. While it is true back in 2009 we had some seriously under-priced homes from some of the banks, prices have gone up considerably since then. We’re still well below replacement cost in most cases and we’re not headed back to 2005 prices anytime soon, however we are still a bargain.

Florida Real Estate Bargains

I guess there is a difference between a bargain and a steal. The steals are over, but there are fantastic bargains and opportunities in this market if you’re realistic. If a buyer is unrealistic, they’ll suffer the same fate as an unrealistic seller, which is no transaction. A buyer who fails to buy in this market is just as damaged as a seller who overprices and misses the top. While the bottom may be behind us, we’re still close enough to it that we can see it in our rear view mirror and prices today will look like a bargain years from now.

Remember back in time when someone you know once said “Gosh, I should have bought every piece of property I could get my hands on back when prices were lower?” Well, in the future I’m sure there will be those that say, “Gosh, I should have bought everything I could back in 2010 and 2011. Those were the days when there was little competition from new home builders, interest rates were at their lowest, prices were below replacement cost, and at those prices they actually cash flowed.”

It pays to be an educated consumer, whether you’re on the buying or selling end. Remember, money is always made on the “Buy”, not the sell. Inventory is going down. If you’re truly a buyer, learn the market and step up now. I bet you’ll be glad you did.

It’s kind of funny how humans follow the herd mentality. When everyone else is buying, people feel more comfortable buying at the top, but when things are down, people are scared of overpaying. Back in 2005 you were overpaying, but most felt good about their purchases. Look what prices have done since. The smart money is buying and holding today. Failure to land a property now is a wasted opportunity.

No, we’re not talking about Santa’s bag here.  We thought this week we’d do a mailbag of topics, and invite questions for future articles.  If you have a question or topic you’d like covered, simply e-mail me at Brett@Topagent.com and we’ll do our best.

Interest Rates

Yes, they’ve been on the move, and the move has been upward.  Rates have risen about .625% in the past 1-2 weeks.  For every 1% rise in rates, it takes away about 9% of a purchasers buying power, so buyers have just lost about 5% buying power in the past 2 weeks.  This is why the media and Wall St. talk about rates so much and where they are today versus historically.  Now, they are still historically low, but they have been moving up.  With prices this low, and rates still fairly low, buying power is still great even though it may not be what it was 2 weeks ago.

SW Florida Real Estate Market Update
It's in the Bag

Foreclosure Listings

Foreclosure listings for single family homes active on the market in Lee County stood at 768 in November Versus 1,107 today.  That’s a 32.42% increase in just one month, and we can attribute this to banks placing properties on the market after the foreclosure moratorium because of the robo-signing issues.  Most banks feel confident going forward, especially for their non-occupied properties.  We see this as a good sign.  The quicker we get all inventory out and to the market the faster the market can heal and move forward.

Pending Sales

Pending sales rose again in November which indicates buyers are ready, willing, and able to buy and they’re making every attempt.  This is another reason we’d like to see all available inventory on the market as the buyers are definitely biting.  All areas of Lee County are seeing a rise in pending sales.  Cape Coral saw a rise of 60 pending sales over last month, Fort Myers saw a rise of 69 sales and Lehigh Acres experienced a rise of 32 pending sales.  Season is upon us and we’ve notice an uptick in buying activity from buyers up North sooner than we did last year, which could mean we’ll be in for another good season this year.

Current Market Index

Each month the Ellis Team produces a current market index which accurately predicts forward activity in the SW Florida real estate market.  This month the index dropped to 4.22, down from 4.62 last month.  The lower the number the hotter the real estate market is.  A higher number indicates a buyers market. We wouldn’t say it’s a buyers market.  We’d characterize it as a sellers market if the property is priced correctly.  Buyers are competing against each other with multiple offers on properties that are priced correctly, and bypassing over-priced listings.  The market speaks.  Sometimes it’s as easy as slowing down and listening to what it’s saying, and if a property isn’t receiving offers, then there’s a good chance it’s the price.  The market is hot, but it’s not forgiving.

Closed Sales Flat

November closed sales were relatively flat Versus October.  In fact, our research shows they’re down slightly, but official numbers won’t be released until next week.  Last November sales rose, so when official numbers come out we could see a transaction drop from last year.

This is the last article before Christmas believe it or not, so next week we’ll either answer your questions or provide updated analysis once official numbers are released.  We hope Santa is good to you and brings you good tides and good cheer, and no matter how big the bag is this year, always look for opportunities to lift somebody else’s spirits this Holiday season and into the new year.

Last week we gave tips on how to sell a home in today’s market from the non-distressed home seller’s perspective.  This week we thought we’d revisit tips on how to buy a foreclosure property since so many try, but very few are the winning buyer.  As a listing agent for many banks, we know what the banks are looking for. We speak to the asset managers.  If you follow these tips your chances will increase as not every buyer knows what the bank considers when looking at multiple offers, which many foreclosures receive.

The first thing buyers must understand is there is a lot of competition for these homes.  Typically bank foreclosures go fast, and for over asking price.  Everybody seems to want them.  So structuring your offer and submitting it correctly will increase your chances.

Tips on buying bank foreclosures in Cape Coral, Fort Myers, Lehigh Acres, and all of SW Florida
Tips on Buying Bank Foreclosures in SW Florida

Keep in mind, listing agents must have all the required information, so if they ask for something upfront, they mean it.  Listing agents don’t have time to track your agent down for this info.  We attach a document to each MLS listing specifying what is required with the offer.  Make sure your agent completes every single field.  We submit offers into an online system, and if information is missing, the offer cannot be submitted.

The bank never sees your offer until one is accepted.  The listing agent must enter information into and online submission, and it must conform to what the bank asks for, and all fields must be filled out.  If a foreclosure has 20 offers, the listing agent doesn’t have time to call 15 agents and beg for information they required upfront.  Keep in mind, it takes awhile to upload 20 offers, and the listing agent may be dealing with 20 properties.

Listing bank foreclosures is very time intensive, and the listing agent coordinates everything from repairs to working out HOA fees, title issues, code violations, etc.  Providing the required information is the first step.

Secondly, consider that you’re probably competing against other buyers, and that many will be above asking price.  So how do you compete?  Consider a higher escrow money deposit, shorter closing time, and definitely a shorter inspection period.  Bank asset managers are also gauging the strength of each buyer, so you want to put your best foot forward in hopes of getting the property.

Banks are on the lookout for buyers tying up properties then using contingencies to escape later.  Banks want solid deals, so you want to dress up your offer to make you look like the best buyer in the batch.  The price will be close to asking price or above because it’s a deal anyway, so you have to compete in other ways.

In many cases banks will counter multiple offers with highest and best.  Buyers are shocked when the bank doesn’t and just accepts one offer, so it always pays to pony up early on and go for it.  If you do get a highest and best form, assume the other buyer wants it as bad as you do, and act accordingly, because if you don’t, chances are you won’t end up with the home.

Be careful that your offer is written well and clearly states all fees and costs.  It is difficult to impossible to make changes later, and it could cost you the home.  Any change to contract later on opens up possibility the home goes back out for rebid and you could lose it, so it pays to write offer correctly the first time.  Same applies with names; make sure everyone who wishes to take title is on contract from beginning. You may not be able to add names until after closing, which could require new title insurance and additional fees.

If you’re purchasing as an LLC, make sure you provide documents upfront that you’re authorized to sign for the LLC.  The bank will ask.

These are some very useful tips by an experienced foreclosure agent. Each bank has their own rules, so be sure to follow directions well.  Make sure you’re working with an agent who understands contract language. Many times we see financing contracts that don’t match up or specify some costs buyer is not allowed to pay under the buyer’s financing program, and the offer cannot be presented to bank until language is cleaned up which could cost the buyer the sale because of delays.  Be sure to work with an agent who has experience writing clear and concise contracts and understands financing in and out.

Following these tips will increase your chances, and ignoring them will most assuredly have you scratching your head wondering why the bank selected another offer.  Good luck and happy house hunting.

Search SW Florida bank foreclosures single family homes

Search SW Florida bank foreclosures condominiums

This month is particularly interesting to study the latest real estate statistics as we really wanted to see what effects if any the foreclosure moratoriums would have on the market, and already we’re seeing some interesting data.  Watching these stats move feels similar to watching a heart monitor and patient’s vital signs.  I guess these statistics are the vital signs of our local market, so let’s dig in and see what the signs are telling us.

October Distressed Sales Chart Lee County Florida Real Estate
October 2010 Distressed Sales Chart- SW Florida

Some of these statistics interact with each other in a cause and effect way.  For instance, some foreclosure listings were pulled in October and distressed sales were down in October.  Distressed sales were up in Cape Coral, partly because foreclosure closings rose by 34 sales, and partly because short sale closings rose by 14.  Everywhere else short sales and foreclosure sales were down.

Inventory levels rose in Fort Myers 3.12%, but fell in Cape Coral and Lehigh.  Countywide inventory levels are up less than 1% from the previous month.

Closings were down about 8.45% in October from September levels.  Fort Myers sales were down 16.49%, Lehigh down 20.21%, but Cape Coral was up 6.88% over the previous month.  Cape Coral can be explained by the increase in foreclosure sales and short sales, and this may account for why the rest of the county’s sales were down as well, because the rest of the county’s distressed sales dropped.  So there seems to be that cause and effect in play we mentioned earlier.

Going forward pending sales are up county wide, and Lehigh Acres leads the way with pending sales up 5.44% over pending sales last month.  Cape Coral is up 1.92%, and Fort Myers is flat.  We track pending sales as pendings lead to closings, however not all pending sales close, so it’s just a vital sign we track.

We have noticed an up tick in buyer call activity and Internet traffic, so there is definitely buying interest in our market.  Banks have begun to release the foreclosure moratorium, so inventory levels may stabilize which will help transactions move forward.

Total distressed sales have fallen 4 straight months, but this could change as inventory levels have been driving sales numbers.  Demand is in the market and this is a case whereby supply is dictating certain aspects of the market.  Any disruptions to supply will temporarily affect sales numbers, and this should not be misinterpreted as decreased demand.  This past month’s results were supply driven.

Keep in mind these are internal tracking we compile and not official sales numbers which won’t be released until next week.

Where will the market head from here?  We believe supply will even out as banks get on top of some of the affidavit issues which plagued some of their foreclosures, and it may force some banks to work a little harder at completing short sales, which would be a good thing.

We are heading into season, and if this year is anything like last year, there was serious demand from our northern friends last season which could bode well again for this season.  This season “Feels” a lot like last season, as traffic has picked up on our roadways, as has real estate traffic, phone calls, and Internet traffic.  This season could be a chance to work down even more inventory, and it would be nice if that excess distressed inventory is available while the visitors are here rather than gracing our presence after they leave.  We’d just as soon sell and dispose of it now than have it come back and haunt us later when the demand might be less.

When it comes to supply, I say “Bring it on”.  We don’t feel holding it back shadow inventory serves any greater good and only prolongs agony later.  Others may disagree and argue that saturating the market further drives down prices, but so does an expanded process.

Ask anyone in the job market if they’d rather have a very deep recession lasting 3 years or a deep recession lasting 6 years.  I think most would rather take their medicine and get it over with so the healing can begin sooner rather than later.  Here in SW Florida we’ve been dealing with a declining market for 5 years now, and many would like to just get it over and begin that healing process.  We don’t want banks or government deciding to prolong the agony SW Florida has suffered for 5 years, as jobs and our local economy takes its cue from real estate.  The sooner we heal this market, the sooner construction jobs and the economy bounces back, and who wouldn’t be in favor of that in SW Florida bout now, or anywhere for that matter?

Visitors are here, pending sales are rising, and inventory is stabilizing, so let’s hope for a great season and a good 2011.

Last week we reported that distressed sales accounted for 63.27% of all single family home sales in August, and that a big shake-up was about to ensue as banks declared they were halting foreclosure sales at auction until they had time to investigate whether they’ve followed proper procedures.

Since that time Three major lenders (J.P. Morgan Chase, Allied Financial Inc. (GMAC,) have all stated they were halting foreclosures, but that doesn’t seem to be the case. Last week there were in fact several foreclosure sales to the astonishment of the banks who have instructed their local counsel to halt proceedings of final judgments until they study each case.

SW Florida Real Estate Foreclosure Market
Stop- Go- Caution

We at the Ellis Team handle foreclosure sales for one of the large banks and FNMA. FNMA says they have not been affected because they didn’t employ the robo signers the big banks did. The large bank we work with gave us orders on 10 new properties in the past 2 weeks, and we had a closing this past week.

To date title companies are still issuing policies and the banks are still closing sales, although we’ve heard reports of some cancelled sales by agents. Banks may be halting summary judgments, but in many cases they are moving forward with new foreclosures to get the process started, but holding off on the final judgment or auction sale until they know they are on solid legal ground with their paperwork. This is not necessarily stopping them from disposing and selling properties they previously foreclosed on.

So one has to wonder if the bank’s announcement was all a farce for publicity. The answer is probably not. These banks are large and decisions take awhile to matriculate down to all the branches. The implications are huge though.

What’s at stake is the bank’s legal authority to foreclose. Typically the bank makes a loan then services the loan after they sell the loan to an investor, often times as a group package in what is called a security. These loans are typically bundled together with many loans, and many investors may join together and invest in the security package. Other times an investor will buy individual packages of loans.

Because these original loans get bought and sold, there must be a paper trail as to who actually owns the security, and the right to foreclose against the borrower. Defense attorneys have long asked for the lender to produce the note, often called “Produce the note defense.”

Usually the lawyers would sign affidavits that they, or the bank does indeed have the note, and the judge would accept that. The reality is, the note and other paperwork may be missing and perhaps never found. Because of all this, some judges may no longer accept those affidavits, and many of these sales may be in question.
Some speculate this could happen in as many as 30-40% of the cases out there, and the answer is nobody really knows, not even the banks or attorneys right now. This is why banks and states have opened investigations. If this is wide-spread, it could have deep financial implications to the banks and investors, and we wouldn’t be surprised to see damage suits against the banks by those foreclosed upon where the paperwork was insufficient.

This very well could stall the process and tie up the courts for awhile, which could affect the real estate market. It would make sense for the banks to emphasize short-sales now that foreclosures could be delayed, but the banks don’t always make sense.

Inventory could dry up, and transaction volume could decline. Some speculate prices would be driven up fast and furious, but we’re not so sure. We’ve had high sales because prices have been at bargain prices. Unemployment is high, and the economy is hurting. Will prices rise just because supply goes down? In a balanced economy, we’d say yes. In this economy, we may just be prolonging the foreclosures further out and delaying our recovery. We hope this situation gets resolved quickly as nothing good results from a foreclosure moratorium. In the end, the property will still be foreclosed or sold, so no sense delaying it and letting neighborhoods decay and the market falter. Let’s hope this gets fixed and we all get back to business soon.

Watch SW Florida Real Estate Update-Foreclosures-October 2010 on video

One of the biggest frustrations buyers have is offering on a bank owned foreclosure and not getting it.  As a listing agent for many of the banks, sometimes buyers call me wondering why their offer wasn’t accepted, so I decided to write a 20 best tips on how to get your offer accepted.

The first thing buyers must understand is there is a lot of competition for these homes.  Typically bank foreclosures go fast, and for over asking price.  Everybody seems to want them.  So structuring your offer and submitting it correctly will increase your chances.

Keep in mind, listing agents must have all the required information, so if they ask for something upfront, they mean it.  Listing agents don’t have time to track your agent down for this info.  We attach a document to each MLS listing specifying what is required with the offer.

Tips on Buying a Bank Foreclosure Chart
How to Buy a Bank Foreclosure Chart

The reason is, the bank never sees your offer until one is accepted.  The listing agent must enter information into and online submission, and it must conform to what the bank asks for, and all fields must be filled out.  If a foreclosure has 20 offers, the listing agent doesn’t have time to call 15 agents and beg for information they required upfront.  Keep in mind, it takes awhile to upload 20 offers, and the listing agent may be dealing with 20 properties.

Listing bank foreclosures is very time intensive, and the listing agent coordinates everything from repairs to working out HOA fees, title issues, code violations, etc.  Providing the required information is the first step.

Secondly, consider that you’re probably competing against other buyers, and that many will be above asking price.  So how do you compete?  Consider a higher escrow money deposit, shorter closing time, and definitely a shorter inspection period.  Bank asset managers are also gauging the strength of each buyer, so you want to put your best foot forward in hopes of getting the property.

In many cases banks will counter multiple offers with highest and best.  Buyers are shocked when the bank doesn’t and just accepts one offer, so it always pays to pony up early on and go for it.  If you do get a highest and best form, assume the other buyer wants it as bad as you do, and act accordingly, because if you don’t, chances are you won’t end up with the home.

Be careful that your offer is written well and clearly states all fees and costs.  It is difficult to impossible to make changes later, and it could cost you the home.  Any change to contract later on opens up possibility home goes back out for rebid and you could lose it, so it pays to write offer correctly the first time.  Same applies with names; make sure everyone who wishes to take title is on contract from beginning. You may not be able to add names until after closing, which could require new title insurance and additional fees.

These are some very useful tips by an experienced foreclosure agent. Each bank has their own rules, so be sure to follow directions well.  Make sure you’re working with an agent who understands contract language. Many times we see financing contracts that don’t match up or specify some costs buyer is not allowed to pay under the buyer’s financing program, and the offer cannot be presented to bank until language is cleaned up which could cost the buyer the sale because of delays.  Be sure to work with an agent who has experience writing clear and concise contracts and understand financing in and out.

Bank foreclosures are prevalent in Fort Myers, Cape Coral, Bonita Springs, Estero, and Lehigh Acres, so following these tips will increase your chances, and ignoring them will most assuredly have you scratching your head wondering why the bank selected another offer.  Good luck and happy house hunting.

Search all Lee County Florida single family home foreclosures on MLS.

Search all Lee County Florida condominium foreclosures in MLS

Official numbers were released last week, and as expected single family home sales dropped.  As you can see from the attached chart, there is some seasonality to this, but there are more reasons as well. 

Fort Myers Cape Coral Real Estate Closed Single Family Homes
SW Florida Real Estate Single Family Home Closed Sales

Sales are still well above 2006-2008 levels, but they are down against 2009 levels which was a record setting year.  Last year the market was filled with bank owned bargain inventory, and the trend this year has been less foreclosures coming to the market so we’ve been steadily selling off that bargain inventory. Actually the market never filled, but as foreclosure properties entered the market they were scooped up just as fast.  The pipeline has slowed this year. 

Combined with the expiration of homebuyer tax credits and high unemployment it’s quite predictable our market would slow.  Median home prices even began rising as less bargain sales were occurring.  In the last 3 months we’ve seen median prices decline from $101,500 in April down to $93,500 in July. 

So if less bargain homes are selling, it must be true that less regular sales are selling as well, or else the median wouldn’t drop.  This is also true, as distressed sales percentages in Lee County reached 64.18% in July vs. 54.66% in April.  Now that season is no longer here, it seems mainly the bargain homes are selling, and there are less bargains, so home sales are down, and non-distressed homes aren’t picking up the slack. 

Last year we predicted we’d see a No-Mans Land market when the foreclosure bargains dried up, and we’re seeing the beginning of this phenomenon now.  There is no major upward pricing pressure due to the economic times. 

Without rising prices, we won’t see increased builder activity, which means less tax dollars to the county government.  With fewer sales, we’ll see less doc stamps revenue to the state.  It’s a vicious cycle, so government better be prepared to make cuts because property tax values are also down which also cuts into county budgets. 

Real estate agents are out interviewing now because they’ve noticed their leads are down and they’re looking to go where there are some leads.  When the deals are gone, so is the investor interest, and we’re left with fewer residents looking to purchase.  We’re not seeing move-up buyers because people are uneasy about the economy and many can’t afford to sell because they owe more than their home is worth, so they can’t take advantage of moving up even if they do have solid employment.  The same goes with buyers looking to move-down.  You cannot move down to save money if you can’t afford to sell at today’s prices. 

This is Labor Day weekend and our market may be laboring, but it will be fine in the end. There are still good buys entering the market, and while we don’t see a lot of immediate upside pressure, we don’t see downward pressure either.  Even with slowing sales, we’re still the 2nd highest year on record.  Buyers looking to take advantage will have to be both quick and patient.  The early bird gets the worm when it comes to fewer foreclosure bargains, and the patient buyer gets the short sale, which can be a bargain if the buyer is prepared to wait.  And because 64.18% of current sales are distressed in some fashion, it pays to be both quick and patient.  The educated buyer with resolve is the real winner in this market.  The fearful buyer is missing opportunities and will kick themselves later.  

Perhaps when the government gets its act together and figures out which way is the road to recovery, we’ll see increased sales and prices.  Look for another homebuyer tax credit soon, or some other vehicle to spur the market, because real estate is traditionally 32% of GDP, and if we can kick start real estate, the economy may follow.

View our newly revamped website Topagent.com

A few years ago we reported that listing agents were listing homes at ridiculously low prices to create buying interest simply because the home was being sold as a short sale.  This is a bad practice for several reasons, and yet we’re seeing it continue today. 

Misleading Short Sales Distort Actual Values
Misleading Values in SW Florida Real Estate

This past week I noticed two different homes, each located in a different subdivision, listed at far below actual values.  This can cause many problems we’ll outline now. 

The bank is not likely to accept a short sale on either of these homes.  The bank will learn the actual value by ordering a BPO (Broker Price Opinion) or a bank appraisal.  Once they determine the home is worth much more, typically they just kill the sale.  Many owners and agents mistakenly believe that banks typically counter, but this isn’t normally true, especially when the offer is far below value.  There also can be more than one lien holder involved, and both look into value, and either one can kill the sale. 

If the banks were to accept such a deal, it creates a potential tax event or larger deficiency judgment against the seller.  The bank could also ask for a promissory note against the seller, and that note would be significantly larger due to the under valued sale. 

Even though the deal is not likely to be accepted, it also hurts the market in two other ways.  Buyers mistakenly believe that artificial number is the new market, because they saw a home for sale for X amount of dollars, even though it has no chance of selling.  Some buyers act quickly to tie it up, then wait months to find out the answer is No.  All the while, some good bargains have come and passed and they’ve missed out.  They may not have been the Steal they thought they were getting, but they were good bargains and suited their needs. 

In addition to the misperception buyers have, banks must also make decisions on how to price foreclosure inventory.  They do look at sold comparables, but they also look at what is on the market.  If they’re not careful, they’ll notice a particularly low priced sale and price theirs too low, which has a domino effect on future foreclosure properties, and it snowballs from there. 

The artificially low listing can influence future sales if people aren’t paying attention.  The foreclosure process is far from perfect, and people from other states typically make decisions about local property, so there is no need to give them false ammunition for fear they may shoot themselves in the foot with it.  When they do this, it hurts the entire market. 

The market will go up and down as conditions dictate, but it need not move in a direction due to false hopes and misinformation.  Sellers need to do a better job interviewing agents, and agents need to insure they know the local market, understand the short sale process, offer advice commensurate with what market conditions dictate.  This can be challenging I know in a changing market, but we see False Listings everyday and it doesn’t help anyone. 

The seller is let down when the bank rejects and it goes to foreclosure, the bank wastes time investigating a False Listing, and the buyer mistakenly believes they’ll end up the proud owner of a steal; all the while great bargains pass them by in the process.  And the market is let down by false and misleading listings that really shouldn’t be on the market.

If you missed last week’s Future of Real Estate Show, you can tune in now.  We interview Lee County Sheriff Mike Scott and ask him tough questions about Florida’s and Arizona’s immigration law and how that affect what he does.  Additionally we ask him his views on controversial red light cameras, the upcoming tight budget process, school resource officers, the jail, traffic stops, and much more.